The middle classes and the better-off will be hit with £7 billion in new
taxes, Alistair Darling disclosed in the pre-Budget report.

The Chancellor announced increases in National Insurance contributions for workers and froze a key income tax threshold to push more earners into the 40 per cent tax band.

The Treasury will also take more money in inheritance tax and levy a new tax on City bonuses. Pension relief will be cut for some high earners and taxes will rise on company cars and workplace canteens.

More than 10 million people will pay more National Insurance from 2011 after changes announced in the pre-Budget report; someone earning £50,000 a year will pay an extra £288 a year.

Tens of thousands of people will be pushed into the higher rate of income tax for the first time from 2012. Existing higher rate taxpayers will see more of their income taxed at 40 per cent.

Mr Darling announced £3 billion of new taxes on middle-class Britain in 2011, which will come on top of about £4 billion announced earlier this year.

With only months before a general election must be called, Mr Darling’s statement was overtly political, framing the campaign as a choice between Labour’s economic plans and the Tory agenda of cutting deeper and quicker.

The package of taxes drew heavy criticism. Business leaders called the NI rise “a tax on jobs” and “an act of madness”. The Tories accused Labour of a “class war” on aspiration.

Mr Darling said the tax rises were needed to control the record deficit, but the Tories said most of the overall total of £8.5 billion unveiled in the pre-Budget report, that will be raised in two years from 2011, will go to pay for more spending on Labour’s chosen public services.

By targeting tax rises on higher earners, the Chancellor increased suspicions that Labour is abandoning the centre-ground and pursuing a “core vote” strategy.

He attempted to calm City fears by announcing that he would halve the Government’s deficit in four years by increasing taxes and squeezing some Whitehall departments’ budgets.

But he insisted that spending on schools, hospitals and the police will still rise, rejecting Conservative calls to cut deeper and quicker into the public sector.

According to the independent Institute for Fiscal Studies, Mr Darling has actually increased the Government’s planned spending by £15 billion over two years from 2011.

By deferring the tax rises until then, he exposed himself to charges of a “scorched earth” approach to the economy, potentially leaving an incoming Tory government to decide whether to keep Labour’s tax plans or find the money elsewhere.

In response, the Tories, forced to show their hand, sent a strong signal that they would try to halt the NI rises, saying it would be the first tax rise they would try to reverse.

Admitting that Britain’s economy will shrink by 4.5 per cent this year, a peacetime record, Mr Darling said that borrowing will be higher than he had forecast, reaching £178 billion this year.

Despite Mr Darling’s promises to curb the annual Government over-spend, the nation’s accumulated debt will go on rising, hitting £1.5 trillion in five years.

Mr Darling said that City bankers and public sector workers will also have to pay for Labour’s plans.

Banks paying bonuses will now have to pay a one-off 50 per cent levy. However, the tax will raise only a modest sum and sparked predictions that it would be widely avoided.

Millions of public sector workers will effectively take a pay cut from 2011 after Mr Darling said annual rises will be capped at 1 per cent, below the expected rate of inflation. But risking controversy, it emerged that MPs will not be covered by the cap.

The unexpected rise in NI, which will hit all those earning more than £20,000, was the most striking announcement in Mr Darling’s speech. He said there would be another 0.5 per cent increase in National Insurance contributions — effectively a rise in income tax. It will come into force in 2011 alongside a previously announced 0.5 per cent rise.

Defending the tax rises, Mr Darling said: “The biggest burden will fall on those with the broadest shoulders.” He told MPs that Britain’s economy was “on the road to recovery” and predicted robust growth by 2011.

George Osborne, the shadow chancellor, said Mr Darling’s statement was a “catastrophe” for the country. He warned that every family in Britain was now paying for Labour’s “criminal” economic irresponsibility. “The message to aspiring families is pretty clear,” he said. “If you want to get on in life, then the Labour Party is not for you any more. Every family in the country is going to be forced to pay for years for this Prime Minister’s mistakes.”

Vince Cable, the Liberal Democrat treasury spokesman, said: “What we needed was a national economic plan and what we have got is an election manifesto.”

Richard Lambert, the CBI director general, said: “The Chancellor has made a serious mistake imposing an extra jobs tax at a time when the economic recovery will still be fragile.”